He Revved Up Renault. Will Nissan Be Next?

How Carlos Ghosn plans to revive Japan's ailing carmaker

Renault Executive Vice-President Carlos Ghosn still recalls the thrill of test-driving a Nissan twin-turbo 300ZX back in 1989, when he ran Michelin North America. "For $32,000, they had a real racing horse. It created a terrific impression on the market," says Ghosn. A decade later, the Brazilian-born manager is packing his bags for Japan to become chief operating officer of a badly ailing Nissan.

Ghosn, 45, faces a daunting task as Nissan Motor Co.'s new Mr. Fixit. The man who turned Renault around in 2 1/2 years will head a team of 40 French executives. They are responsible for making a success of Renault's recent $5.4 billion investment in Japan's No. 2 auto maker. Answering directly to Nissan President Yoshikazu Hanawa, Ghosn must come up with a scheme to reverse Nissan's losses, which totaled $119 million in the year ended Mar. 31, 1998. He also has to tackle its sliding market share and help shrink an estimated $34.5 billion in debt.

Massive layoffs in Nissan's 137,200-strong workforce or closures of some of its 14 plants around the world may be out of the question, given the Japanese distaste for radical overhaul. Indeed, no one knows whether Ghosn can persuade Nissan management to take drastic steps. But industry insiders believe that his broad international experience and personable style give him a chance. "There is no one better equipped in the industry than Carlos Ghosn," says Nick Snee, auto analyst at J.P. Morgan Securities in London.

Ghosn will apply to Nissan many of the techniques he used at Renault, where Chairman Louis Schweitzer recruited him in October, 1996, from Michelin. Three months later, Renault posted a $1 billion loss for the year. Ghosn slashed $500 from the cost of each auto and got Renault out of the red by 1997. He then designed a plan to lop off $3.5 billion in costs over three years--a scheme that contributed to the 63% rise in Renault's 1998 profit of $1.5 billion.

Although Renault has cut some 9,000 jobs over the past three years, most of its gains are due to lower purchasing expenses, which account for some 50% of a car's cost. Ghosn trimmed Renault's supplier list from 1,000 to 300. Those that survived the cut enjoyed greater order volume but had to deliver lower prices in return. "It was a win-win situation," says Noel Goutard, chief executive at $6.6 billion French auto-parts giant Valeo, Renault's No. 2 supplier.

At Nissan, Ghosn likewise aims to tackle purchasing practices and supplier relations to bring costs down. Nissan will also sell off $2.7 billion worth of noncore assets. But first, Ghosn plans a three-month study of Nissan's global operations. By July, he aims to have a detailed agenda. He estimates that Nissan should be able to slash costs by at least $500 million this year, $1 billion in 2000, and $1.5 billion in 2001.

Ghosn, known as "le cost killer" in France, insists his role as a turnaround artist is broader. He vows that his team will immediately begin co-designing a new generation of snappier models. In addition, the two companies will consolidate their 30 existing platforms into 10 by 2010. The first shared platform will produce replacements for Nissan's Micra and Renault's Clio models, in 2002 or 2003. "Cost-cutting and new products go together," he says. "You can't do one without the other."

SERIOUS STRIFE? With five languages in his repertory after working in Brazil, the U.S., and Europe, Ghosn is a big believer in people skills. During an interview in his modest office at Renault's Paris headquarters, he says: "80% of the success of an action plan is listening to people." Indeed, executives at Renault applaud Ghosn for inspiring change without forcing it on managers. "He doesn't give you the recipe," says Annie Dona-Gimenez, a vice-president for purchasing at Renault who led one of Ghosn's cost-cutting teams.

Ghosn will need all his persuasive powers, since Nissan has made it clear it intends to guard its independence. Renault will be outnumbered on Nissan's board, with three executives, vs. 37 Nissan positions that Hanawa is loath to trim. Some Tokyo analysts already predict serious strife between the two partners. "Most of the top managers who are supposed to be responsible for the current mess will remain on the board," says Koji Endo, automotive analyst at Schroders Japan Ltd.

Ghosn intends to win over his Japanese counterparts in part by launching a dialogue on how each company can help improve the other. In a country where face-saving counts, such two-way exchanges can help salve wounded egos. Ghosn has already pointed out that Renault can learn from Nissan. For example, he wants Nissan engineers to work in Renault plants to boost efficiency and engineering. Such give-and-take may not guarantee cooperation from Nissan's top management for his turnaround plan. But Ghosn's velvet glove may work better than an iron fist.

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